Energy Tariffs

All about Demand tariffs?

Demand tariffs introduce a new element to electricity bills. This article will help you understand how Demand tariffs work, and how Bill Hero can help you get the best price outcomes when your distributor migrates you to a Demand tariff. Should I stay on a Demand tariff? There has been much debate on Demand tariffs in Australia, and the consensus is now clear that customers on demand tariffs generally pay more for their power than those who are not. At Bill Hero, even though we're still the only comparison tool that can actually compare demand plans, our policy now is to advise our subscribers on demand plans to opt out of that demand tariff and instead take up a conventional time-of-use or single-rate plan. Demand tariffs are assigned by distribution networks, and until December 2025, they could assign a Demand tariff charge to a consumer meter without consent or even informing the bill payer for that meter. In general, energy retailers will match their retail plan pricing structures with the wholesale pricing structures they face, and the distributor's tariff assignment determines those wholesale structures for each meter. That's why many households see demand charges suddenly appearing on their bills - it's because the network has imposed a demand tariff, and the retailers will then match that tariff change by migrating the customer onto a retail plan that also includes demand charges. Customers with a demand tariff assigned will generally only be offered demand plans by the retailers. The good news is that you can now request to be migrated off a demand tariff - distributors will reassign your meter to time of use by default,m but you can also request to be reassigned to single-rate if you wish. Your distributor controls your meter's tariff assignment and ultimately decides whether to change it, but you need to submit a change request through your retailer. Background to Demand Tariffs The energy transmission and distribution networks are under-utilised nearly all the time, but they must be built and maintained to accommodate high peak load events — such as those heatwave days in summer when everyone turns on their air conditioners at once — otherwise, the grid will become unstable, requiring 'load shedding', or even blackouts during those high demand times. Building and maintaining the infrastructure to support these peak demand events is very expensive, and all the costs eventually end up in everyone's bills, so it makes sense to find ways to minimise those peak load events, and also to apportion costs more toward those whose behaviour as energy consumers is driving those peak loads, and reward those whose behaviour helps minimise those peaks. Shaving peak demand down even a little bit can translate into significant savings at the aggregate level, and demand tariffs are intended to help achieve that. How Demand Tariffs Work Demand tariffs are designed to deliver a 'price signal' to encourage individual consumers to minimise both their total usage during peak times, and also the intensity of that usage Total peak time usage can be minimised by shifting consumption out of peak times and into the shoulder and off-peak times as much as possible. This usually means time-shifting your consumption by running dishwashers, washing machines, and so forth during the afternoon 'solar sponge' period, or late at night. Not all consumption can be time-shifted, but it's usually still possible to minimise the intensity of peak time consumption by daisy-chaining appliance usage to avoid running multiple appliances simultaneously. The price signal has two parts: a reward of cheaper rates per kWh, and a punishment of a 'demand charge' that scales according to your highest instantaneous peak load recorded in any billing period. A demand tariff requires a smart meter. The tariff includes electricity usage and supply charges, like any other tariff, and an additional fee called a ‘demand’ or ‘capacity’ charge. The demand charge is a charge per kW that may be applied based on your maximum usage during any 'peak' times throughout a billing period. The structure of the demand change differs across the electricity distribution zones. Demand charges may be applied only if your usage exceeds a demand threshold at any time in a billing period, or they may always be present, but scale according to your maximum peak demand in a billing period. Demand charges per kW can be applied to every kWh consumed across the entire billing period, or a daily demand charge penalty rate may be applied for every day in the billing period. So you only need to over-consume for a single moment once in a billing period to pay demand charges over the entire billing period. Demand tariffs are different to how most of us are used to paying for electricity. If you have good knowledge of your electricity consumption patterns, and also have the willingness and ability to monitor and modify your usage, then a demand tariff could save you money. If not, it could cost you a lot more. 🤔 Explain it like I'm five... Household A has a single 1 Kilowatt heater running all day. 1 Kilowatt means the heater consumes 1,000 watts each hour, so it will consume a total of 24,000 watts over a twenty-four-hour period. Household B has 24 of the same 1 Kilowatt heaters, each consuming 1,000 Watts per hour. The owner of this household switches them all on simultaneously and runs them for 1 hour. Household B also used 24,000 watts in the same 24-hour period. Under a single-rate tariff structure, both households would be charged the same amount, as they use the same amount of electricity, measured in kWh. This does not acknowledge the additional intensity of demand that household B has placed on the network. With a demand tariff, if the consumption spike occurs during the 'demand window', Household B will pay an additional demand charge for the intensity of the load their 24 heaters placed on the grid. Household A will pay less, as a reward for spreading the load over time. The demand charge is applied in addition to the familiar per-kWh usage charges. It is calculated based on your highest level of consumption measured during the 'demand window', which varies by distribution network but typically is between 3:00 p.m. and 9:00 p.m. Let's say the rate for the demand component is $4 per kW per Month: The demand charge is based on your highest level of energy usage in kilowatt-hours (kWh), consumed during any 30-minute metering period in the demand window on any day in the month. This is then converted into a 'demand value', measured in kilowatts or kW. If you are in Household B and run all your 24 heaters simultaneously at 7 pm for 1 hour, which falls within the demand time window, you use 24kW, representing your highest usage spike for the billing period. This 24kW value is then multiplied by the monthly demand charge rate. That would be 24kW peak demand, multiplied by the demand charge of $4 per kW per month. You would have an additional $96 charge on the bill. In the next month, if you doubled the number of heaters in your home and ran them all simultaneously for an hour again, you'd generate a bigger spike of 48 kW, and the additional demand component in your bill would be 48 x $4 = $192. Demand tariff benefits? In theory, the main direct benefit of demand tariffs for individual consumers is that kWh usage rates under demand tariffs should be lower than those under a single-rate tariff and lower than those under a non-demand time-of-use tariff. If you're careful about managing the intensity of your peak demand and therefore minimising your Demand charges, you could pay less overall under this kind of tariff, provided that the baseline consumption rates are really lower than the rates for non-demand alternative plans. Demand tariff disadvantages Demand tariffs punish households that let their guard down and allow their electricity usage to spike, even for a single moment during the 'demand window'. Demand charges are based on the highest single peak consumption event on any day of the billing period, but the charge applies to every day in that period, so a single peak consumption event will result in a higher price for the entire billing period. There is a risk in being on a demand tariff, and they are suitable only for households with a good understanding of demand patterns and a solid ability to manage that demand. Will a demand tariff save me money? It's theoretically possible that a demand tariff may save you money, but accessing savings under this kind of tariff will generally require you to be more vigilant in monitoring your power usage to avoid spikes and adopt efficient energy usage practices. Typically, this means minimising your total energy usage during peak times as well as the intensity of that usage. You can achieve this by time-shifting your usage, for example, by running dishwashers and washing machines outside the demand window, and by daisy-chaining your demand window appliance usage so that you avoid running multiple appliances simultaneously. The more common reality is that energy consumers on demand tariffs typically pay more for their power than those who are not. In NSW, IPART research has found that Demand households pay on average $200 - $300 more per year than on-demand households Demand tariff structures by state NSW - Ausgrid Since 1 July 2019, demand tariffs have been assigned by default for all new residential and small business connections and for existing customers on flat tariffs who have chosen to upgrade to a smart meter. Demand (introductory) tariffs for 12 months are applied for existing residential and small business customers on flat tariffs who require meter replacement due to due to meter failure. Demand (introductory) tariffs are intended to allow customers to understand their patterns of usage for 12 months, before they will be automatically assigned to the default demand tariff. Customers assigned to the demand (introductory) tariff have the option to be reassigned to another demand tariff, or to a TOU tariff. A new TOU-demand and existing TOU tariffs are available for customers who opt-out of a demand tariff. TOU customers replacing meter for any reason will remain on TOU tariffs, and can opt-in to demand tariffs. Flat tariffs are no longer available to new connections. Demand Structure and Charge Window Each demand tariff for Ausgrid consists of three elements: - A fixed daily charge (in cents per day), - An energy consumption charge (in cents per kWh) with a seasonal TOU structure, - A seasonal demand charge (in cents per kW per day). The demand element is based on the maximum energy consumption recorded in any 30-minute period within the defined seasonal demand window on a working weekday in each billing period (measured in kW). The resulting demand charge applies for each day in the billing period (before being reset for the next month). The demand window for measuring the maximum demand is aligned with a corresponding TOU peak energy window. In seasons where there is no peak energy on working weekdays, a summer window of 2-8 pm applies. More information is available from Ausgrid here https://www.ausgrid.com.au/-/media/Documents/energy-use/tariffs/Demand-tariff-Q--A-for-residential-customers.pdf and here: https://www.ausgrid.com.au/-/media/Documents/energy-use/tariffs/Ausgrid-Fact-Sheet_Intro-to-Residential-Demand-Tariffs.pdf NSW - Endeavour Endeavour Energy is introducing both a transitional demand tariff and a ‘cost reflective’ demand tariff intended to provide flexibility for customers to select the pace of their transition. The transitional demand tariff will become the default tariff for all new customers and those existing customers with the required metering who upgrade their network connection to three-phase or fro bi-directional flow of electricity after installing solar. Customers assigned to the transitional demand tariff will have the option to opt-out to the flat energy based tariff or the seasonal time of use tariff. The cost reflective demand tariff will be available to all customers on an opt-in basis subject to metering requirements. Endeavour’s demand tariffs consist of three tariff parameters: a seasonal maximum monthly demand charge, a flat energy charge and a fixed charge. NSW - Essential Energy Essential Energy’s demand tariffs are available on an opt-in basis for customers who have an interval or smart meter. Each Essential Energy network tariff is made up of one or more of the following components: - A fixed charge component – an annual supply charge that applies to each connected premises to which electricity is delivered. The amount does not vary with the amount of energy a customer uses. This component is charged as a fixed amount per day. - An energy charge component – a charge that is applied to each unit of electricity consumed in cents per kilowatt hour (kWh). Depending on the particular tariff, the consumption charge may also vary with the time of day or the amount of energy consumed in a period. - A demand charge component – a charge that is applied to either a customer’s maximum demand level in dollars per kilovolt-ampere (kVA) or per kilowatt (kW) or their electricity capacity requirement in dollars per kVA – depending on the tariff. Additional information on Essential Energy demand tariffs is available here : https://www.essentialenergy.com.au/-/media/Project/EssentialEnergy/Website/Files/Our-Network/DemandTarrifBrochure.pdf?la=en&hash=07626F1F0BAF28F9924329C1304B0383CD2E673B Victoria Demand tariffs are available on an opt-in and opt-out basis for residential customers with consumption less than 60 mWh per annum, or peak demand less than 120 kW. Demand is based on the maximum demand (kW) in each month that is recorded between 3pm and 9pm on work days with no minimum chargeable demand level (except in the United Energy zone where a minimum monthly chargeable demand of 1.5kW applies). South Australia Residential customers can move to a demand tariff on an opt-in basis provided they have the appropriate metering technology. Demand charges for residential customers are based on the maximum demand in any half-hour trading interval since the last meter read: - Summer Peak Demand on all days between 1600 and 2100 local time during November to March only - Winter Shoulder Demand on all days between 1600 and 2100 local time - Off-peak Demand at all other times (the price is zero for actual off-peak demand) Queensland - Energex If a retailer does not specify its preferred network tariff for a new customer, Energex will assign the customer to the Residential Transitional Demand tariff. If a customer classification is not received from the retailer for move-in small customers, the retail customer moving-in to the existing premises will inherit the existing customer classification and existing network tariff. Move-in customers are not considered as a new customer to Energex, as these customers are not a new connection to the distribution network. Energex will initiate network tariff reassignment of customers in the following instances: - When a SAC customer changes from a basic accumulation meter to a smart (Type 4) meter,including end-of-life meter replacement, and customer initiated meter replacement. - To transition customers that already have a smart meter from a flat tariff to a demand or time-of-use based tariff, and - as a result of review and assessment of customer assignment to ensure customers are assigned to the correct tariff class and tariffHow does Bill Hero handle demand tariffs? Demand charges for residential customers are calculated as a $/kVA/month or $/kW/month, for demand recorded at a connection point. These charges are applied to the maximum half hourly kW power reading that occurred at a connection point during either: - a single peak recorded anytime in the month, or - the maximum demand recorded within a peak demand window (specific timeframe). - Peak demand on all days between 1600 and 2100 local time How does Bill Hero handle demand tariffs? The data present in your bill is specific to the tariff type you are on. Bill Hero does not compare tariff types and so will not present demand tariff plans for subscribers who are not already on a demand tariff. Bill Hero will detect from your bill if you are already on a demand tariff, and will compare your bill with the alternative Demand plans available from all retailers in the market. You'll see the Demand price item broken out in the price breakdown for every plan compared for you. Unlike Energy Made Easy and Victoria Energy Compare, Bill Hero is smart enough to calculate this additional Demand price into your comparisons. Why do some plans show the Demand at $0? Demand tariffs are inherently complicated, and not every retailer has billing systems capable of calculating and charging for Demand. Being on a Demand Tariff means that your distributor has decided to assign your meter to a Demand tariff type, and is therefore charging a new Demand component wholesale fee to your retailer, in addition to the network connection and per kWh fees wholesale fees. Retailers must pay the wholesale demand fee to the distributor for any of their customers on a Demand Tariff; however, it's up to the retailer to decide how to manage this additional element in their cost of goods sold. Most retailers have designed Demand plans that explicitly include the Demand component, but that's not the only way to do it. Some retailers that do not yet support Demand plans and billing may choose not to offer any retail plan at all to consumers on Demand tariffs. An unsupported tariff type is one of the main reasons a retailer might refuse an application from a new customer. However, any retailer can still offer a non-demand plan to demand tariff customers if they choose to. In this situation, the retailer will have increased their consumption charges to compensate for the additional Demand charge and is effectively absorbing the risk that your wholesale Demand charges will not exceed the margin they've allocated to cover it.

How does Bill Hero handle GST?

GST applies to almost all consumer items in Australia, including energy bills. But unfortunately, for long-suffering energy consumers, the GST element in energy bills is far from straightforward and can lead to confusion when comparing bills and plans. This article explains how GST works for energy bills and describes how Bill Hero handles GST calculations. GST in energy plan Fact Sheets Every retailer is obliged to quote GST-inclusive pricing in their fact sheets and offers - so every time you see details for a new plan offered by any retailer, you can be confident that the quoted rates and pricing will already include GST. GST does not apply to Solar FiT Solar feed-in tariff rates for residential households are not subject to GST, so the solar FiT rates quoted in the retailer Fact Sheet and in your solar bills will always be displayed as GST-exclusive amounts. GST in energy bills Although retailers are obliged to quote inc-GST pricing in their fact sheets, some retailers issue bills that display ex-GST rates for the various line items documented in the bill. This can make it tricky to compare your current rates vs the rates offered under an alternative plan - the rates for the new plan will always be quoted inc-GST, but your current bill may or may not display inc-GST rates, so it's not always possible to compare the rates per kWh in your bill vs an alternative Fact Sheet. AGL is a particular offender in this regard, but many other retailer bills also display non-GST rates. Inconsistent application of GST in bills In principle, GST should be quite simple in energy bills - a 10% GST uplift applies to every line item except for solar FiT, which, as we've seen, is GST-free. However, in practice, bills can get complicated with the application of incentives, discounts and other price-impacting elements, and retailers can be inconsistent in how GST is applied to these elements in their bills. For example, some retailer bills will display ex-GST rates for kWh consumption but will include GST in concessions or discount amounts. Others will do the opposite with inc-GST consumption rates and ex-GST concessions and discounts. How to tell if your bill is inc- or ex-GST You may need to look very closely at your bill to determine if the rates are displayed, including or excluding GST. Some retailers make it easy by stating the rates are inclusive of GST. For example, this extract from a Momentum Energy bill clearly displays that the pricing is 'GST incl': Others are less obvious, but you can still tell that it's GST inclusive. For example, this Origin Energy bill does not disclose in the line items if the pricing is inc-or ex-GST: However, if you look at the final total for this bill, it reveals that all the pricing is inc-GST: Here's an example from AGL where the GST status is similarly not revealed for each line item: Only by looking at the final total can we determine that all the rates in this bill are displayed excluding GST, and because of this, the final bill price is 10% higher than what you'd expect by looking at the line items individually: ​ How Bill Hero handles GST Bill Hero's core analysis is to calculate what the consumption documented in your current bill would have cost you under each of the relevant alternative plans available to you. Those alternative plans are always quoted with inc-GST rates, so Bill Hero calculates a GST-inclusive Comparison Price for your uploaded bill, even if your bill happens to be a GST-exclusive bill. ℹ️ There can be situations where the Comparison Price might differ from the final Bill Price displayed on your bill. See here for details: https://support.billhero.com.au/en/articles/8074277-bill-price-vs-comparison-price

Wholesale pass-through pricing

Some retailers, including Amber Electric and Arcline from RACV offer an innovative 'wholesale pass-through' pricing model where they charge their customers variable wholesale rates for energy, plus a fixed monthly membership charge. Although the actual price per kWh varies every 30 minutes, retailers offering this pricing model are still obliged to publish Fact Sheets for their plans that quote conventional prices per kWh. Bill Hero uses those official Fact Sheet prices to calculate the comparison prices for these plans that are included in our full-market comparison. When a Bill Hero subscriber uploads one of these dynamicly priced bills to be compared, we use the consumption data and final bill to calculate how it compares to the other conventionally priced plans available in the market. Wholesale pricing is good? Right? In theory, for most products, access to wholesale rates is very attractive. This is true in principle for energy as well. However, it does come with some additional risk and complexity for energy consumers. Wholesale energy spot prices change every 30 minutes and can be subject to extreme volatility. Aside from actually collecting the payments that fund the entire energy economy, one of the main roles of an energy retailer is to absorb wholesale price volatility so that energy consumers can pay predictable rates for the energy they use. Under a wholesale pass-through model, you're directly exposed to the full spot market volatility. AEMO sets limits on how high and low the spot price can vary - currently, this is up to $17,500 per mWh, or $17.50 per kWh, and down to -$1,000 per mWh, or -$1.00 per kWh. The effective per-kWh price you'd pay under a wholesale passthrough bill depends on the prevailing wholesale spot price for each 30-minute window when you consume electricity. If you're willing and able to track the spot price and adjust your usage accordingly, this kind of plan can yield great price results. If you have solar and a battery, you can act as an energy trader and pursue an arbitrage strategy by soaking up cheap power in your battery when it's available and then exporting it when the price is high. Amber offers a mobile app that can help you understand and predict price fluctuations so you can adjust your usage accordingly. Even if you diligently follow the market to minimise your high-priced usage, you can undo all that good work by overusing power at a peak time when the price spikes. If you're not able or willing to pay attention to the market and adjust your usage, you could wind up being charged more than you would under a conventional plan. Amber plans include insurance that guarantees that even if you overuse at expensive times and run up high bills, the insurance will compensate you if you've been charged more than Default Offer equivalent rates. This is a good feature and reduces the risk to consumers, but it does mean that you'd be out of pocket until the insurance rebate kicks in, effectively giving an interest-free loan to Amber. In general, a wholesale pass-through plan is most suitable for energy consumers who are motivated to watch the market more or less constantly and are able to adjust their usage opportunistically, e.g. by running the washing machine and dishwasher at different times of day whenever the price is lowest, and by going out of the house when prices are highest - eg go to your local cinema or shopping centre to enjoy their air conditioning on a very hot day rather than consuming high-priced energy to run your own.

Solar Net Metering

Everyone knows that solar systems generate electricity, but what happens to that electricity once generated depends on the configuration of your solar system and meter. Two main solar meter configuration possibilities exist - Gross Metering and Net metering. Gross Metering As the name suggests, Gross Metering means that all of your solar production will immediately be exported to the grid and will therefore become subject to your Feed-in Tariff (FiT) arrangements with your electricity retailer. Net metering Net Metering means that your solar production is first used to service your own household's energy requirements, and any excess is exported to the grid, becoming subject to your FiT arrangements. Net metering is the standard configuration for residential solar installations and is vastly more common than Gross Metering. It's preferable to have Net Metering since the main financial benefit of solar is not in the FiT revenue that can be achieved; it is in the potential to use your own self-generated energy and avoid importing kWh to service some of your household energy needs.

Time of Use tariff

As the name suggests, a Time of Use tariff has different pricing for your consumption depending on time of day and day of week. Some Time of Use tariffs may also include seasonal price changes. The main point of a Time of Use tariff is to better reflect the wholesale costs of electricity - generally, electricity is more expensive during peak times, and less expensive during off-peak times. Time of Use tariffs have three defined time bands: Peak, Off-peak, and Shoulder, with different pricing per kWh for each time band. It's common that off-peak time bands include weekends and public holidays. Time of Use tariffs can also be called 'Flexible' tariffs

Climate Saver tariff

The Climate Saver tariff features different rates in Summer (November - March) and Winter (April - October). In general, Winter rates are lower under Climate Saver tariff, so this tariff was more attractive for those who experienced higher electricity consumption in winter, eg those households that use electricity for heating. The Climate Saver tariff is no longer available for new entrants, although it continues to be supported for households already on this tariff type.

Transitional Time of Use tariffs

What is a transitional time of use tariff? A standard Time of Use tariff is designed to be cost-reflective – meaning that the rates charged for usage at peak times are generally much higher than the rates charged at off-peak times. This reflects the underlying reality in the wholesale market, where prices are higher at peak times. Transitional ToU tariffs were deliberately designed to reduce the disparity between peak prices and off-peak prices, by making the peak rate lower and compensating by making the off-peak and shoulder rates higher than they would otherwise be. This has the effect that a consumer who has come across from a single rate tariff—where all consumption is billed at the same rate, no matter what time of consumption—is less likely to experience the bill shock that could otherwise occur if they were to consume too much energy at peak times. Transitional ToU tariffs are now closed to new connections, but some households will still be on legacy Transitional ToU tariffs. In general, under a standard ToU tariff, it's possible to achieve savings by time-shifting energy consumption away from expensive peak times and into the cheaper shoulder and off-peak times, thus minimising peak consumption. These savings are less pronounced under a Transitional ToU tariff, because the price difference between the peak and non-peak rates is lower, or there may be no difference in the price applied to each tariff component.

Single rate tariff

Single-rate means that the price you'll be charged per kWh of usage will not change by the time of day or by the day of the week that you use that energy. Flat single-rate tariffs The simplest tariff is the flat single-rate tariff where you'll be charged the same rate per kWh of usage no matter when you consumed the energy, and no matter how much you consumed over the billing period. Stepped single-rate tariffs So-called 'single-rate' tariffs may not actually be single rate. Some single rate tariffs are 'stepped rate', which means you'll pay a different price per kWh once you've crossed a certain threshold of total consumption for the billing period.